Generational Opportunity; Building on our Core Strength Investor Day 2020 Mark Hawkins President and CFO Evan Goldstein SVP, Investor Relations
Forward-Looking Statement "Safe harbor" statement under the Private Securities Litigation Reform Act of 1995. This presentation contains forward-looking statements about the company's financial and operating results, which may include expected GAAP and non-GAAP financial and other operating and non-operating results, including revenue, net income, earnings per share, operating cash flow growth, operating margin improvement, expected revenue growth, expected current remaining performance obligation growth, expected tax rates, stock-based compensation expenses, amortization of purchased intangibles, shares outstanding, market growth, environmental, social and governance goals, expected capital allocation, including mergers and acquisitions (such as the proposed acquisition of Slack Technologies, Inc.), capital expenditures and other investments, expectations regarding closing contemplated acquisitions and contributions from acquired companies. The achievement or success of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, the company’s results could differ materially from the results expressed or implied by the forward-looking statements it makes. The risks and uncertainties referred to above include -- but are not limited to -- risks associated with our ability to consummate the proposed Slack Technologies, Inc. transaction on a timely basis or at all; the satisfaction of the conditions precedent to consummation of the proposed transaction; our ability to secure regulatory approvals on the terms expected, in a timely manner or at all; our ability to successfully integrate Slack Technologies, Inc.’s operations; our ability to implement its plans, forecasts and other expectations with respect to Slack Technologies, Inc.’s business after the completion of the transaction and realize expected synergies; our ability to realize the anticipated benefits of the proposed transaction, including the possibility that the expected benefits from the proposed transaction will not be realized or will not be realized within the expected time period; the impact of Slack Technologies, Inc.’s business model on our ability to forecast revenue results; disruption from the transaction making it more difficult to maintain business and operational relationships; the negative effects of the announcement or the consummation of the proposed transaction on the market price of our common stock or on our operating results; significant transaction costs; unknown liabilities; the risk of litigation or regulatory actions related to the proposed transaction; the effect of the announcement of the merger on the ability of Salesforce or Slack Technologies, Inc. to retain and hire key personnel and maintain relationships with customers, suppliers and others with whom we or Slack Technologies, Inc. do business, or on our or Slack Technologies, Inc.’s operating results and business generally; the impact of, and actions we may take in response to, the COVID-19 pandemic, related public health measures and resulting economic downturn and market volatility; our ability to maintain service performance and security levels meeting the expectations of our customers, and the resources and costs required to avoid unanticipated downtime and prevent, detect and remediate performance degradation and security breaches; the expenses associated with our data centers and third-party infrastructure providers; our ability to secure and costs related to additional data center capacity; our reliance on third-party hardware, software and platform providers; the effect of evolving domestic and foreign government regulations, including those related to the provision of services on the Internet, those related to accessing the Internet, and those addressing data privacy, cross-border data transfers and import and export controls; current and potential litigation involving us or our industry, including litigation involving acquired entities such as Tableau, and the resolution or settlement thereof; regulatory developments and regulatory investigations involving us or affecting our industry; our ability to successfully introduce new services and product features, including any efforts to expand our services beyond the CRM market; the success of our strategy of acquiring or making investments in complementary businesses, joint ventures, services, technologies and intellectual property rights; our ability to realize the benefits from strategic partnerships, joint ventures and investments; our ability to successfully integrate acquired businesses and technologies; our ability to compete in the market in which we participate; the success of our business strategy and our plan to build our business, including our strategy to be a leading provider of enterprise cloud computing applications and platforms; our ability to execute our business plans; our ability to continue to grow unearned revenue and remaining performance obligation; the pace of change and innovation in enterprise cloud computing services; the seasonal nature of our sales cycles; our ability to limit customer attrition and costs related to those efforts; the success of our international expansion strategy; the demands on our personnel and infrastructure resulting from significant growth in our customer base and operations, including as a result of acquisitions; our dependency on the development and maintenance of the infrastructure of the Internet; our real estate and office facilities strategy and related costs and uncertainties; fluctuations in, and our ability to predict, our operating results and cash flows; the variability in our results arising from the accounting for term license revenue products; the performance and fair value of our investments in complementary businesses through our strategic investment portfolio; the impact of future gains or losses from our strategic investment portfolio including gains or losses from overall market conditions that may affect the publicly traded companies within our strategic investment portfolio; our ability to protect our intellectual property rights; our ability to develop our brands; the impact of foreign currency exchange rate and interest rate fluctuations on our results; the valuation of our deferred tax assets and the release of related valuation allowances; the potential availability of additional tax assets in the future; the impact of new accounting pronouncements and tax laws; uncertainties affecting our ability to estimate our tax rate; uncertainties regarding our tax obligations in connection with potential jurisdictional transfers of intellectual property, including the tax rate, the timing of the transfer and the value of such transferred intellectual property; uncertainties regarding the effect of general economic and market conditions; the impact of geopolitical events; uncertainties regarding the impact of expensing stock options and other equity awards; the sufficiency of our capital resources; risks related to our 2023 and 2028 senior notes, revolving credit facility and loan associated with 50 Fremont; our ability to comply with our debt covenants and lease obligations; and the impact of climate change, natural disasters and actual or threatened public health emergencies, including the ongoing COVID-19 pandemic. Further information on these and other factors that could affect the company’s financial results is included in the reports on Forms 10-K, 10-Q and 8-K and in other filings it makes with the Securities and Exchange Commission from time to time. These documents are available on the SEC Filings section of the Investor Information section of the company’s website at www.salesforce.com/investor. The Investor Information section of the company’s website at www.salesforce.com/investor contains a significant amount of information about Salesforce, including financial and other information for investors. Salesforce encourages investors to visit this website from time to time, as information is updated and new information is posted. Salesforce.com, inc. assumes no obligation and does not intend to update these forward-looking statements, except as required by law. No Offer or Solicitation This communication is not intended to and shall not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any securities, or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made, except by means of a prospectus meeting the requirements of Section 10 of the U.S. Securities Act of 1933, as amended. Additional Information and Where to Find It In connection with the proposed transaction, the Company intends to file with the SEC a registration statement on Form S-4 that will include a proxy statement of Slack Technologies Inc. and that also constitutes a prospectus of the Company. Each of the Company and Slack Technologies Inc. may also file other relevant documents with the SEC regarding the proposed transaction. This document is not a substitute for the proxy statement/prospectus or registration statement or any other document that the Company or Slack Technologies Inc. may file with the SEC. The definitive proxy statement/ prospectus (if and when available) will be mailed to stockholders of Slack Technologies Inc. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT, PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS THAT MAY BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security holders will be able to obtain free copies of the registration statement and proxy statement/prospectus (if and when available) and other documents containing important information about the Company, Slack Technologies Inc. and the proposed transaction, once such documents are filed with the SEC through the website maintained by the SEC at http://www.sec.gov. Copies of the documents filed with the SEC by the Company will be available free of charge on the Company’s website at www.salesforce.com/investor or by contacting the Company’s Investor Relations department at investor@salesforce.com. Copies of the documents filed with the SEC by Slack Technologies Inc. will be available free of charge on Slack’s website at investor.slackhq.com or by contacting Slack Technologies Inc.’s Investor Relations department at ir@slack.com.
Participants in the Solicitation The Company, Slack Technologies Inc. and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information about the directors and executive officers of the Company, including a description of their direct or indirect interests, by security holdings or otherwise, is set forth in the Company’s proxy statement for its 2020 Annual Meeting of Stockholders, which was filed with the SEC on May 1, 2020, and the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2020, which was filed with the SEC on March 5, 2020, as well as in a Form 8-K filed by the Company with the SEC on June 1, 2020. Information about the directors and executive officers of Slack Technologies Inc., including a description of their direct or indirect interests, by security holdings or otherwise, is set forth in Slack Technologies Inc.’s proxy statement for its 2020 Annual Meeting of Stockholders, which was filed with the SEC on May 5, 2020, and Slack’s Annual Report on Form 10-K for the fiscal year ended January 31, 2020, which was filed with the SEC on March 12, 2020. Other information regarding the participants in the proxy solicitations and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement/prospectus and other relevant materials to be filed with the SEC regarding the proposed transaction when such materials become available. Investors should read the proxy statement/prospectus carefully when it becomes available before making any voting or investment decisions. You may obtain free copies of these documents from the Company or Slack Technologies Inc. using the sources indicated above.
Defining a Generational Opportunity Name Job title Mark Hawkins President and CFO
2020 2022E 2023E ~$53 ~$45 ~$23 ~$49~$52 ~$63 Non-Digital GDP Digital GDP Digital Transformation spend will reach an inflection point The Future Enterprise Source: IDC, Business Resiliency: A Stop on the Way to the Future Enterprise, Aug 2020. Worldwide Nominal GDP Driven by Digitally Transformed vs Other Enterprises ($T) 2020 2022E 2024E $2.39 $1.78 $1.31 $1.81$1.80$1.84 Other IT Spending DX Spending Worldwide DX Spending vs Other ($T) Source: IDC Worldwide Digital Transformation Spending Guide, Nov 2020 (V2 2020)
Source: IDC, Business Resiliency: A Stop on the Way to the Future Enterprise, Doc # US46760620, August 2020. IDC COVID-19 Impact on IT Spending Survey. Survey conducted during 7th May to 15th May 2020 period. Rating scale of 1 (lowest priority) to 4 (highest priority). N=908 global technology leaders. Business Operations Resiliency Programs Customer Experience Programs Data Programs for Insights into Business Connectivity Programs SW Development Capabilities for Product Innovation Digital Trust Programs Evaluation of New Ecosystem Partners Digital Infrastructure Resiliency Programs Workplace Transformation Programs 4.01.0 As a result of the COVID-19 pandemic, how much will your organization be prioritizing the following initiatives for the rest of 2020 and into 2021? C-Suite Agenda Items Have Been Reprioritized
Ambitious vision grounded in core values Values Drive Value Leading with our values, Salesforce is the trusted guide accelerating customer success in the new all-digital, work- anywhere economy with Customer 360. We are the #1 CRM #1 Analytics #1 Integration company. Our Vision
Placeholder Footer Placeholder Slack
Portfolio of Expanding TAMs FY21 FY22 FY23 FY24 FY25 Analytics Integration Platform Marketing Commerce Service Sales Total Addressable Market growth from FY21-FY25 FY25 Total Addressable Market1 $175B 11% FY21-FY25 4YR CAGR2 3 4 5 $200B Calculations performed by Salesforce and graphics created by Salesforce based on Gartner research. Refer to appendix slide “Gartner Content Details” for details on the calculations performed. 1. Calculations for Sales, Service, Marketing, Commerce and Analytics are based on Gartner, Forecast: Enterprise Application Software, Worldwide, 2018-2024, Q3 2020 Update, 30 September 2020. Calculations for Integration and Platform are based on Gartner, Forecast: Enterprise Infrastructure Software, Worldwide, 2018-2024, Q3 2020 Update, 30 September 2020. 2. 4 Year CAGR performed based on total TAM inclusive of recent acquisitions. 3. Platform defined as High Productivity aPaaS, High Control aPaaS, Application Platform Software, Business Process Management Suites, Digital Experience Platforms, Create, Verify. 4. Integration is defined as Full Life Cycle API Management, Integration Platform as a Service (iPaaS), Application Integration Suite, Data Integration Tools, 5. Analytics is defined as Modern BI Platforms, Traditional BI Platforms, Analytic Applications, Data Science Platforms, Location Intelligence.
z System of Intelligence Evolution from system of record —> engagement —> intelligence Rep Productivity High Velocity Sales, Call Coaching and Territory Planning Revenue Cloud End-to-end revenue management; CPQ, Billing, Order Management, PRM Industry Products Improves customers’ time to value, becoming increasing portion of Sales Cloud mix FY17 FY21 FY25 $21B 15% CAGR $14B $8B 11% CAGR 14% CAGR Sales Revenue TAM Revenue TAM TAM Calculations performed by Salesforce and graphics created by Salesforce based on Gartner research. Refer to appendix slide “Gartner Content Details” for details on the calculations performed. 4 Year CAGR for revenue based on restated FY17 ASC 606 revenue by cloud data, FY21 revenue represents Q3 FY21 revenue annualized. Growth Opportunity
z FY17 FY21 FY25 $32B 14% CAGR $20B $12B Omni-channel Engagement Unites voice, chat, messaging and bots Service Intelligence Real time recommendations + Resource optimization Industry Products Service Cloud is frequently customized via our Industry offerings Field Service Lightning ARR of >$400m growing 89%1 Service 12% CAGR 24% CAGR Revenue TAM Revenue TAM TAM Growth Opportunity 1. FSL annualized recurring revenue growth based on ending Q3 FY21 Calculations performed by Salesforce and graphics created by Salesforce based on Gartner research. Refer to appendix slide “Gartner Content Details” for details on the calculations performed. 4 Year CAGR for revenue based on restated FY17 ASC 606 revenue by cloud data, FY21 revenue represents Q3 FY21 revenue annualized.
z Audiences 360 Customer Data Platform is the Single Source of Truth B2C+B2B Commerce Digital commerce expanding beyond retailers Payments Powered by Stripe New opportunity to further customer success GMV Growth 79% growth as of Q3 FY211 FY17 FY21 FY25 $41B 19% CAGR $24B $12B 14% CAGR 36% CAGR Marketing & Commerce Revenue TAM Revenue TAM TAM Growth Opportunity 1 GMV Growth based on Q3 FY21 YoY growth in constant currency. Calculations performed by Salesforce and graphics created by Salesforce based on Gartner research. Refer to appendix slide “Gartner Content Details” for details on the calculations performed. 4 Year CAGR for revenue based on restated FY17 ASC 606 revenue by cloud data, FY21 revenue represents Q3 FY21 revenue annualized.
z Ecosystem Advantage World class AppExchange, ISVs, and SIs Modern Low Code App Dev Fastest application development technology for beginners to pro-coders Employee Experience & Automation Employee Experience is a strategic imperative Shield (Data and Security) ARR of >$500m growing 30%1 FY17 FY21 FY25 $32B 3% CAGR $21B 7% CAGR 25% CAGR Platform Revenue TAM Revenue TAM TAM $24B Growth Opportunity 1. Shield annualized recurring revenue growth based on ending Q3 FY21 Calculations performed by Salesforce and graphics created by Salesforce based on Gartner research. Refer to appendix slide “Gartner Content Details” for details on the calculations performed. 4 Year CAGR for revenue based on restated FY17 ASC 606 revenue by cloud data, FY21 revenue represents Q3 FY21 revenue annualized. FY17 and FY21 revenues have been adjusted to remove revenues associated with the Data Cloud as reflected on the following slide.
z Solving Universal Challenge Pervasive customer issue with integrating disparate systems and driving actionable insights Proven Products Broadest + deepest platforms, unrivaled communities, industry recognition and successful customers Democratizing Technology Making it easier and faster for business users to build, deploy and succeed Synergies Every digital transformation is a data transformation; Mulesoft $1.2B Annualized Revenue at 37%1 FY17 FY21 FY25 $49B 19% CAGR $34B $17B 10% CAGR 163% CAGR Analytics & Integration Revenue TAM Revenue TAM TAM Growth Opportunity Calculations performed by Salesforce and graphics created by Salesforce based on Gartner research. Refer to appendix slide “Gartner Content Details” for details on the calculations performed. 4 Year CAGR for revenue based on restated FY17 ASC 606 revenue by cloud data, FY21 revenue represents Q3 FY21 revenue annualized. FY17 and FY21 revenues reflect revenues from our Analytics and Integration offerings currently reported in Platform and Other in the FY17 and FY21 Revenue by Cloud external disclosures. 1. Mulesoft annualized revenue and growth based on ending Q3 FY21 revenue
Portfolio Recognition Tableau is a Leader in the Gartner Magic Quadrant for Analytics and Business Intelligence Platforms in 2020. Mulesoft is a Leader in the Gartner Magic Quadrant for Enterprise Integration Platform as a Service in 2020.
Gartner does not endorse any vendor, product or service depicted in its research publications and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose. The Gartner document is available upon request from Salesforce. A Leader in the Gartner Magic Quadrant for Sales Force Automation 28 July 2020, Analyst(s): Theodore (Tad) Travis, Adnan Zijadic, Melissa Hilbert, and Ilona Hansen A Leader in the Gartner Magic Quadrant for CRM Customer Engagement Center 04 June 2020, Analyst(s): Brian Manusama, Nadine LeBlanc A Leader in the Gartner Magic Quadrant for Multichannel Marketing Hubs 12 May 2020, Analyst(s): Noah Elkin, Benjamin Bloom, Colin Reid, Joseph Enever, Mike McGuire. A Leader in the Gartner Magic Quadrant for Digital Commerce 25 August 2020, Mike Lowndes, Jason Daigler, Penny Gillespie, Sandy Shen, Yanna Dharmasthira. A Leader in the Gartner Magic Quadrant for Analytics and Business Intelligence Platforms 11 February 2020, Analyst(s): James Richardson, Rita Sallam, Kurt Schlegel, Austin Kronz, Julian Sun. A Leader in the Gartner Magic Quadrant for Enterprise Low-Code Application Platforms 30 September 2020. Analyst(s): Paul Vincent, Yefim Natis, Kimihiko Iijima, Jason Wong, Saikat Ray, Akash Jain, Adrian Leow. A Leader in the Gartner Magic Quadrant for Enterprise Integration Platform as a Service 21 September 2020, Analyst(s): Eric Thoo, Massimo Pezzini, Keith Guttridge, Bindi Bhullar, Shameen Pillai, Abhishek Singh. Commerce Service Marketing Sales Platform Integration Analytics
z FINS HLS PubSec Manufacturing Retail & CG Comms & Media TT&H Capital Markets National Defense Oil & Gas Auto Retail H o sp itality Trave l Tran sp o rtatio n Wealth Banking Medical Device Pharma Providers Discrete Process Consumer Goods State & Local National Civilian Media Comms Utilities Insurance Payers Industries Vertical Software Coverage Map by Industry Salesforce Analyst view of TAM Coverage based on TAM divided by sub-industry. 1Reflects approximate annualized recurring revenue as of July 31, 2020 from Salesforce Industry specific products and go-to-market organizations. ~$2B ARR1 Enterprise-scale Industries business; accelerating investments and growth Expanded Portfolio Continuous innovation; focus on 12 large, regulated industries with poor customer service Economic Benefits Higher ASPs, lower attrition, more new logos and incremental TAM Salesforce Industry Product Vlocity Industry Product Salesforce & Vlocity Industry Product Size of square reflects relative TAM size No Current Coverage Growth Opportunity
z Differentiation Most Robust Enterprise Software AppExchange Customer Success ISVs solve incremental business challenges our customers face Financial Benefits ISV solutions improve customer retention and expansion rates Salesforce Analyst view of TAM Coverage based on TAM divided by # of ISVs in each Industry & Region sector. ISVs and AppExchange FINS HLS Pub Sec Manufacturing Retail & CG Comms & Media TT&H High Tech Pro Services AMER EMEA APAC JP LATAM High CoverageMedium CoverageLow CoverageMinimal Coverage Size of square reflects relative TAM size AppExchange Coverage Map by Industry & Region Growth Opportunity
Einstein Predictions AI powered predictions fuels customer growth 80B+ predictions per day published as of November 2020. FY19 FY21 1B predictions per day 80B+ predictions per day Product Recommendations for Marketing and Commerce Best Response for Customer Service Proactive Outreach and Next Best Action Suggestions to Boost Sales
Competitive Advantage Large and Growing Market Values Driven M&A Execution Best in Class GTM Customer Success Stakeholder Capitalism Digital Transformation Imperative Trailblazer Community Ecosystem Advantage Culture Entrepreneurial Spirit Innovation
Gaining share driven by customer success The Global Leader in CRM 2015 2016 2017 2018 2019 2020H1 3.8% 4.8% 5.3% 3.9% 19.8% Ranked #1 for CRM Applications based on IDC 2020H1 Revenue Market Share Worldwide. Source: IDC, Worldwide Semiannual Software Tracker, October 2020. CRM market includes the following IDC-defined functional markets: Sales Force Productivity and Management, Marketing Campaign Management, Customer Service, Contact Center, Advertising, and Digital Commerce Applications.
$13.3B FY19 $10.5B FY18 $6.7B FY16 $8.4B FY17 FY23 FY24 $17.1B FY20 ~$21.1B FY211 ~$24.8B Core FY221 ~$50B+ FY26 Target Including Slack1 Generational Opportunity FY25 ~$0.6B Slack Stub FY221 ~$46B Core FY26 Target1 ~$4B Slack FY26 Target1 ~19% FY21 - FY26 CAGR ~17% FY22 - FY26 CAGR ~38% FY22 - FY26 CAGR FY21: High end of FY21 revenue guide of $21.10B to $21.11B as of December 1 2020. FY22: High end of FY22 revenue guide of $25.45B to $25.55B including $600M from Slack and $150M from Acumen Solutions as of December 1, 2020. FY26: Long range target for FY26 of $50B inclusive of FY26 long range target for Slack of $4B as of December 8, 2020. Long range target for Slack is based on Salesforce projections and assumes the integration of Slack into Salesforce and associated synergies. FY22E - FY26E Slack CAGR calculated on FY22 $0.6B Slack stub guidance annualized (calculated as $1.1B) based on assumption of close date in late Q2 FY22 as of December 1, 2020. FY21E - FY26E CAGR based on high end of FY21 revenue guide of $21.10B to $21.11B as of December 1, 2020 and FY26 long range target of $50B as of December 8, 2020.
Capturing the Opportunity Name Job title Evan Goldstein SVP, Investor Relations
Positioned for success across regions, end markets and products Note: for illustration purposes only. Diverse Growth Portfolio Enterprise Commercial Small Business Industries APAC EMEA AMER JAPAN LATAM Essentials Who Where What Sales Service Platform Marketing & Commerce Analytics & Integration
Key growth metrics tracking favorably Executing Go-To-Market Playbook FY19 77% 23% FY21 Land and Expand FY20 76% 24% New Logos Existing Logos 77% 23% 9% 91% Multi-Cloud Adoption 8% 92% Multi-Cloud Single Cloud 7% 93% 69% 31%International Expansion 67% 33% International Americas 66% 34% % of Incremental Annualized Revenue % of Annualized Recurring Revenue % of Annualized Recurring Revenue 22% New Logos including Tableau Note: Percentages for each year based on the trailing twelve months ended July 31 (fiscal Q2) as of the fiscal years shown. Data excludes contribution from Tableau for Land and Expand and Multi- Cloud Adoption. Land and expand is based on incremental change in annualized revenue, and Multi-Cloud and International data is based on annualized recurring revenue for dates noted.
Cohorts increase ARR via new clouds and expansion of existing ones Cohort for each fiscal year defined as new logos in that year. Data graphed represents annualized recurring revenue for each fiscal year shown for the trailing twelve months as of July 31 (fiscal Q2). Consistent Land and Expand Success FY10 FY17 To tal A R R 2.1x FY17 Cohort’s ARR Expansion over 4 years FY21 Cohort based on year of initial product purchase FY17 Cohort’s Average # of Clouds FY17 FY21 1.8 3.6 FY21 ARR
FY06 FY21 New clouds become part of customer expansion strategy Enterprise Land and Expand Example $2M $70M A n n u al iz e d R e cu rr in g R ev e n u e Started with Sales Cloud in FY06 Added Marketing Cloud in FY13 Customer Example starting with their first purchase in FY’06. Annualized Recurring Revenue for each year shown is as of July 31 (fiscal Q2). Starting point of bars is illustrative. FY06 FY08 FY11 FY13 FY15 FY19
Evolution of FY15 SMB Cohort shows land and expand success Small Businesses Grow With Salesforce C o h o rt C u st o m e r C o u n t A R R p e r C u sto m e r 36% Beginning ARR FY15 FY20 Beginning ARR represents annualized recurring revenue as of February 1, 2014 (beginning of FY15) for new logos to Salesforce in SMB segment (defined as customers with less than 20 employees). Attrition represents total lost annualized recurring revenue for that cohort from FY15-FY20. Incremental ARR represents incremental new annualized recurring revenue booked within that cohort from FY15-FY20. Ending ARR represents annualized recurring revenue as of January 31, 2020 for that cohort. Attrition Incremental ARR Ending ARR 3,000 0 $100k $0 19x Higher ARR per Customer ~20% Avg. Annual Customer Attrition Total ARR CAGR Scope of the Analysis: Top Customers: Consumer Technology Hospitality Enterprise Software ARR CAGR 222% 259% 229% New logos in FY15 SMB Logos (<20 employees) Tracked through FY20
A portfolio of unique unit economic margins Managing the Business Note: for illustration purposes only. Enterprise Commercial Small Business Industries APAC EMEA AMER JAPAN LATAM Essentials Who Where What Sales Service Platform Marketing & Commerce Analytics & Integration
Subscription economics offer valuable view of business performance Driving Long Term Success COS S&M G&A R&D Subscription Economics Non-GAAP P&L Lifetime Revenue Cost to Book2 Cost to Serve3 $1 of ARR/ Attrition Costs to acquire ARR / Incremental ARR (Costs to support LTR) / LTR Less Unit Economic Margin1 Current Period Revenue Less Non-GAAP Op Margin 1 Unit Economic Margin in this and subsequent slides are calculations based on assumptions regarding unit lifetime revenue and subscription economics, including cost to book, cost to serve, and attrition dynamics. Unit Economic margin is not an operating margin. The “long-term margin” considers a low-single-digit growth rate. 2Cost to Book includes expenses related to adding incremental ARR; these expenses most closely relate to Sales and Marketing expense but do not directly tie to that line on the external income statement. Cost to Book is calculated based on costs associated with obtaining new ARR divided by new ARR and includes and excludes items presented as Sales and Marketing expense on our external P&L. The illustration in this slide is meant to provide a directional understanding of the metric and does not intimate that unit economic margins are operating margins. 3Cost to Serve includes expenses related to supporting the Lifetime Revenue; these expenses most closely relate to components of COS, G&A, and R&D expense but do not directly tie to those lines on the external income statement. Cost to Serve is also a metric, where expenses are divided by subscription revenue and does not refer solely to these expenses. The illustration in this slide is meant to provide a directional understanding of the metric and does not intimate that unit economic margins are operating margins. CTB and CTS investments have short and long term impacts
FY17 FY20 Attrition improvement > CTB increase Unit Economic Margin Improving Cost to Book Cost to Serve Attrition Unit Economic Margin $0.75 $1.25 40% 60% 20% 50% 5% 15% Pro tip: don’t use a ruler. Note: Axis labels are illustrative.
Investing in our generational opportunity Cost To Book Reflects Sophisticated GTM… International ARR1 International Sales HC2 FY17 FY20 Enterprise ARR3 Product Clouds4 Industry Offerings 28% 43% 33% 7 8 59% 66% 1Represents % of total annualized recurring revenue coming from outside of the U.S. and Canada as of July 31 (fiscal Q2) for each year noted. 2Represents % of total sales organization headcount based outside of the US and Canada as of January 31 (fiscal Q4) for each year noted. 3Represents % of total annualized recurring revenue coming from accounts with $1 million in annual spend (“Enterprise”) as of July 31 (fiscal Q2) for each year noted. 4Represents total major product clouds. FY20 number includes Sales, Service, Platform, Marketing, Commerce, Integration, Analytics. 49% 5 2 Cost to Book $0.75 $1.25
FY17 FY20 CTB investments produce higher quality ARR …Which Drives Attrition Improvement… Numbers are illustrative. 1Represents approximate attrition rate from accounts with $1 million in annual spend (“Enterprise”) as of January 31, 2020. 2Represents approximate attrition rate from accounts with 2 or more Clouds, as defined on the previous slide, as of January 31, 2020. Enterprise Industries Multi-Cloud SMB + CMRL Enterprise1 Horizontal CRM Single Cloud Multi-Cloud2 Industries Products Salesforce FY20 Attrition % Higher Lower Attrition5% 15%
Improves Unit Economic Margins FY17 FY20 Lower attrition outweighs higher cost to book profile …And Improves Unit Economic Margins Attrition5% 15% Lower Attrition Broader Business Portfolio Higher Quality ARR Incremental Go-To-Market Investments 1CAGR calculated between ending Salesforce cost to book (internal metric) as of January 31, 2017 and ending Salesforce cost to book as of January 31, 2020. 2CAGR calculated between ending Salesforce attrition as of January 31, 2017 and ending Salesforce attrition as of January 31, 2020. Note that Salesforce attrition excludes recent M&A, consistent with external financial statement disclosure. Cost to Book $0.75 $1.25 +3% FY17-FY20 CAGR1 -7% FY17-FY20 CAGR2
…validate growth strategy while applying near term P&L pressure Improving Unit Economic Margins… FY17 Subscription Economics Unit Economic Margin1 Mid-30s 40% Income Statement FY20 FY17 Non-GAAP S&M %2 39% FY20 39% 1 Unit Economic margin in this and subsequent slides are calculations based on assumptions regarding unit lifetime revenue and subscription economics, including cost to book, cost to serve, and attrition dynamics. Unit Economic margin is not an operating margin. The “long-term margin” considers a low-single-digit growth rate. 2 Represents Non-GAAP Sales & Marketing expense as a percentage of Revenue for each fiscal year shown. This is a non-GAAP financial measure. Refer to the Appendix for an explanation of non- GAAP financial measures, and why we believe these measures can be useful, as well as a reconciliation of non-GAAP financial measures to the most comparable GAAP measures, when applicable. 4 Current company unit economic margin forecast as of October 31 (fiscal Q3), 2020. 3 Represents Sales & Marketing expense as a percentage of Revenue for each fiscal year shown. Lower Attrition Broader Business Portfolio Higher Quality ARR Incremental Go-To-Market Investments Prelim FY214: 39% GAAP S&M %3 45% 46%
Wrapping Up Name Job title Mark Hawkins President and CFO
FY16 FY17 FY18 FY19 FY20 FY21E FY22E GAAP Operating Margin % Non-GAAP Operating Margin % Revenue $s 0% 30% $6.7B ~$25.6B High End of FY22E revenue guide of $25.45B to $25.55B as of December 1st 2020. FY21E GAAP Operating Margin, Non-GAAP Operating Margin, and OCF Margin based on guidance provided December 1st 2020. FY22E Revenue based on guidance provided December 1st 2020. Non-GAAP operating margin is a non-GAAP financial measure. Refer to the Appendix for an explanation of non-GAAP financial measures, and why we believe these measures can be useful, as well as a reconciliation of non-GAAP financial measures to the most comparable GAAP measures, when applicable. FY17 and FY18 revenues recasted under ASC 606. FY16 under ASC 605. History of top line, margin, and cash flow growth Track Record of Execution FY16 FY17 FY18 FY19 FY20 FY21E OCF $s $1.6B +25% FY16-FY21 CAGR ~$4.9B Operating Cash FlowRevenue and Operating Margin
Range of outcomes framed by operating efficiencies and M&A dilution FY22 Non-GAAP Op Margin Dynamics 17.6% FY21 Guide FY22 Core Expansion FY22 Slack Dilution FY22 Bridge Range of Net Expansion + Dilution 16.6% 18.6% Pro tip: don’t use a ruler. Includes T&E and Real Estate savings offset by growth investments such as GTM and Technology capacity Illustrations above do not reflect actual guidance. FY22 Non-GAAP Operating Margin guidance to be provided at a later date.
Subtitle text Footer Placeholder $28.4B 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 $5BFastest to Years Since Company Founded Note: Salesforce revenue of $5.4B in FY15 and $10.5B in FY19. Source for Microsoft, Oracle and SAP revenues: FactSet. $10B Fastest to $20B Fastest to ~$50B+ FY26 Target Including Slack1 Generational Opportunity FY21: High end of FY21 revenue guide of $21.10B to $21.11B as of December 1 2020. FY22: High end of FY22 revenue guide of $25.45B to $25.55B as of December 1, 2020. FY26: Long range target for FY26 of $50B inclusive of long range target for Slack for FY26 of $4B as of December 8, 2020. Long range target for Slack is based on Salesforce projections and assumes the integration of Slack into Salesforce and associated synergies. $10.2B $5.4B Fastest to
Appendix
+ Salesforce Customer 360 *Subject to the closing of the proposed acquisition of Slack, anticipated in the fiscal quarter ending July 31, 2021.
Gartner Content Details The Gartner content described herein (the “Gartner Content”) represent(s) research opinion or viewpoints published, as part of a syndicated subscription service, by Gartner, Inc. ("Gartner"), and are not representations of fact. Gartner Content speaks as of its original publication date (and not as of the date of this presentation, December 8th 2020), and the opinions expressed in the Gartner Content are subject to change without notice. Gartner Total Addressable Market for fiscal years (FY) shown reflect the forecasted amounts for the following calendar years (CY); FY17 represents CY16, FY21 represents CY20, FY22 represents CY21, FY23 represents CY22, FY24 represents CY23, FY25 represents CY24. • Sales: Calculations for Sales (Customer Experience and Relationship Management) are based on Gartner, Forecast: Enterprise Application Software, Worldwide, 2018-2024, Q3 2020 Update, 30 September 2020. Calculations for FY17 TAM based on Gartner Forecast: Enterprise Software Markets, Worldwide, 2014-2021, 2Q17 Update, June 27, 2017. • Service: Calculations for Service (Customer Service and Support) based on Gartner, Forecast: Enterprise Application Software, Worldwide, 2018-2024, Q3 2020 Update, 30 September 2020. Calculations for FY17 TAM based on Gartner Forecast: Enterprise Software Markets, Worldwide, 2014-2021, 2Q17 Update, June 27, 2017. • Marketing and Commerce: Calculations for Marketing and Commerce (Digital Commerce and Marketing) based on Gartner, Forecast: Enterprise Application Software, Worldwide, 2018-2024, Q3 2020 Update, 30 September 2020. Calculations for FY17 TAM based on Gartner Forecast: Enterprise Software Markets, Worldwide, 2014-2021, 2Q17 Update, June 27, 2017. • Platform: Calculations for Platform based on Gartner, Forecast: Enterprise Infrastructure Software, Worldwide, 2018-2024, Q3 2020 Update, 30 September 2020. Calculations for FY17 TAM based on Gartner Forecast: Enterprise Software Markets, Worldwide, 2014-2021, 2Q17 Update, June 27, 2017. Platform defined as High Productivity aPaaS, High Control aPaaS, Application Platform Software, Business Process Management Suites, Digital Experience Platforms, Create, Verify. • Analytics and Integration: Calculations for Analytics based on Gartner, Forecast: Enterprise Application Software, Worldwide, 2018-2024, Q3 2020 Update, 30 September 2020. Calculations for Integration based on Gartner, Forecast: Enterprise Infrastructure Software, Worldwide, 2018-2024, Q3 2020 Update, 30 September 2020. Calculations for FY17 TAM based on Gartner Forecast: Enterprise Software Markets, Worldwide, 2014-2021, 2Q17 Update, June 27, 2017. Integration market is defined as Full Life Cycle API Management, Integration Platform as a Service (iPaaS), Application Integration Suite, Data Integration Tools. Analytics is defined as Modern BI Platforms, Traditional BI Platforms, Analytic Applications, Data Science Platforms, Location Intelligence.
Non-GAAP Financial Measures This presentation includes information about non-GAAP income from operations, non-GAAP operating margin, non-GAAP sales and marketing expense and non-GAAP sales and marketing expense as a percentage of revenue (collectively the “non-GAAP financial measures”). These non-GAAP financial measures are measurements of financial performance that are not prepared in accordance with U.S. generally accepted accounting principles and computational methods may differ from those used by other companies. Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with the company’s consolidated financial statements prepared in accordance with GAAP. Management uses both GAAP and non-GAAP measures when planning, monitoring, and evaluating the company’s performance. The primary purpose of using non-GAAP measures is to provide supplemental information that may prove useful to investors and to enable investors to evaluate the company’s results in the same way management does. Management believes that supplementing GAAP disclosure with non-GAAP disclosure provides investors with a more complete view of the company’s operational performance and allows for meaningful period-to-period comparisons and analysis of trends in the company’s business. Further, to the extent that other companies use similar methods in calculating non-GAAP measures, the provision of supplemental non-GAAP information can allow for a comparison of the company’s relative performance against other companies that also report non-GAAP operating results. Non-GAAP operating margin is the proportion of non-GAAP income from operations as a percentage of GAAP revenue. Non-GAAP income from operations excludes the impact of the following items: stock-based compensation, and amortization of acquisition-related intangibles. Non-GAAP sales and marketing expense excludes amortization of intangibles and stock based compensation expense. Non-GAAP sales and marketing expense as a percentage of revenue is based on GAAP revenue.
Non-GAAP Reconciliation Table (in millions) ASC 606 ASC 605 Non-GAAP income from operations FY20 FY19 FY18 FY17 FY16 GAAP income from operations $297 $535 $454 $64 $115 Plus: Amortization of purchased intangibles $792 $447 $287 $225 $158 Stock-based expenses $1,785 $1,283 $997 $820 $594 Less: Operating lease termination resulting from purchase of 50 Fremont $0 $0 $0 $0 $(37) Non-GAAP income from operations $2,874 $2,265 $1,738 $1,109 $830 As Margin % Total revenues $17,098 $13,282 $10,540 $8,392 $6,667 GAAP operating margin 1.7% 4.0% 4.3% 0.8% 1.7% Non-GAAP operating margin 16.8% 17.1% 16.5% 13.2% 12.5% Year-over-Year improvement (24) bps 57 bps 326 bps 78 bps 177 bps (in millions) ASC 606 Non-GAAP Sales and Marketing Expense FY20 FY17 GAAP Sales and Marketing Expense $7,930 $3,812 Less: Amortization of purchased intangibles $352 $98 Stock-based expenses $853 $389 Non-GAAP Sales and Marketing Expense $6,725 $3,325 As % of Revenue Total revenues $17,098 $8,437 GAAP Sales and Marketing Expense 46% 45% Non-GAAP Sales and Marketing Expense 39% 39%
